Banks
Decide where consumer credit fits on the balance sheet, and whether to build, partner or buy.
The landscape
Banks are weighing excess liquidity against capital, CECL and examiner expectations. Many grow through fintech partnerships and purchased loans where they don't own the customer. Others sell portfolios to private capital to free up capital. Our founder sat on the bank side of these decisions at Capital One, RBS and Citizens, and has been on the fintech side since.
Where we help most
- Growing consumer lending with a defensible through-the-cycle return case
- Evaluating fintech partnerships and loan purchases
- Loss forecasting and stress testing that examiners accept
- Portfolio sales and capital relief
Use cases for banks
Lending and credit risk
Credit policy design and evaluation
Design a credit box, or test an existing one: who you approve, at what limit, with what verification, and how the application funnel and offers shape who applies. We measure which rules actually rank-order risk and what each change would do to approvals, losses and return.
Pricing and unit economics
Set prices from loss-adjusted returns, not a competitor's rate card. Risk-based pricing, price response and adverse selection, channel and acquisition cost, and return by segment.
Credit model strategy
Decide whether to build, buy or replace a credit model, and make sure it changes decisions. Custom versus bureau and vendor scores, model development oversight, deployment into policy, and performance monitoring.
New product launch
Launch a credit product without its own performance history. Proxy data, launch credit box and limits, test-and-learn design, early-warning triggers and launch economics.
Loss forecasting and stress testing
Forecast losses that management, auditors and examiners will accept. Vintage and roll-rate forecasting, CECL reserve review, macro scenarios and stress testing.
Collections and recovery strategy
Reduce losses after the loan is booked. Roll-rate segmentation, treatment and channel strategy, and champion/challenger testing.
Competitive and market analysis
Know what competitors are doing from what they have to disclose. Public filings, ABS trust performance, call reports, BDC marks and changes in lenders' published credit criteria.
Capital markets and partnerships
Bank–fintech partnerships
Design or evaluate a partnership between a bank or credit union and a fintech originator. Our founder has been on both sides: buying fintech loans at a bank, and restructuring bank partnerships as the fintech.
Forward-flow deal design and evaluation
Structure or evaluate an agreement to sell or buy loans on an ongoing basis. Eligibility criteria, pricing mechanics, concentration limits, performance triggers, servicing terms and reporting.
Portfolio valuation and sales
Price a whole-loan portfolio to buy, sell or mark. Loss, prepayment and cash-flow assumptions from tape-level data, diligence on the originator and its servicing, and a clear read on what a price implies.
Case studies
Restructuring bank partnerships and building a valuation business for PE buyers
A Carlyle-backed student lending platform needed better unit economics from its bank partnerships, and saw an opening as banks sold student loan portfolios to private equity.
Making the case for a bank's push into unsecured lending
A super-regional bank weighing more unsecured consumer lending needed a quantitative answer on through-the-cycle returns, and a way to grow quickly.
Credit frameworks for new products and loss forecasting for a $50B+ consumer book
Launching new consumer products, including education refinance and point-of-sale financing for the Apple iPhone Upgrade Program, while owning CCAR and loss forecasting across the consumer portfolio.
Cutting charge-offs by $10MM a year through collections strategy
Building a centralized credit analytics function across all US consumer products and using it to rethink collections.
Running risk-based pricing for a $50B credit card portfolio
Overseeing the risk-based pricing program for a $50B card portfolio, and the segmentation and valuation behind balance-build strategy for 16 million subprime accounts.
Related analysis
LightStream to Carlyle: working backwards to the deal math
$7.7B of prime personal loans sold for roughly 93.5 cents. Using only public disclosures, here is what the price implies about losses, duration and Carlyle's return, and why Truist was willing to take it.
Are banks outsourcing lending to fintechs?
During the pandemic, the fastest-growing loan category at large US banks was loans to non-bank financial institutions, which mostly means warehouse lines to fintechs. Banks increasingly grow in assets where they don't own the customer.
Reading Goldman's Apple Card loss expectations from its CECL reserve
With almost no loss history on Apple Card, how do you estimate its risk? CECL adoption made reserves comparable across issuers, and Goldman's 11.5% reserve implied about a 6% annual loss rate, closer to Citi than Amex.
Is there such a thing as too much deposit?
Deposit growth outpaced loan growth, loan-to-deposit ratios fell, and NIM compressed. The loans that did grow came from fintech warehouse lending and riskier unsecured consumer credit. Then the pandemic turned the trend into a flood.
The dilemma in lending
The best credit comes from borrowers who don't need the money. That's an oxymoron, and yet true. The opportunity is in borrowers with an urgent need today and strong income prospects tomorrow.
Have a credit question with money behind it?
A portfolio to value, a credit box to rethink, a funding partner to convince. Send a short note and we'll reply within one business day.
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